PA Might Want To Cut And Run After Five Mini-Casino Licenses

It now seems the Pennsylvania Gaming Control Board (PGCB) needs to make some important decision.

Last week’s round of mini-casino auctioningwent without a bidder, and now it appears that the state may not sell all 10 of these licenses. As a result, the PGCB faces two roads diverged in a wood.

What is a mini-casino?

A scaled-down version of traditional casinos, mini-casinos feature 300 to 750 slot machines. Some may include up to 30 table games.

This subsect of the PA gaming industry became an option after Pennsylvania passed a satellite casino law last October that allowed for 10 new casinos to fall into a new category of the gambling establishment: Category 4. Licenses for these properties would cost $7.5 million. Adding 30 table games would cost an additional $2.5 million.

However, these satellite properties cannot be located within 25 miles of existing Category 1, 2, or 3 properties.

Timeline leading up to latest no-show bids

As the first rounds of auctions neared, over 40 percent of the 2,560 municipalities in Pennsylvania opted not to participate. That included most of Philadelphia and all of Lancaster County. The consensus, particularly in Philadelphia, was a fear of oversaturation of casinos.

In January’s first two auctions, Penn National ($50.1 million) and Stadium Casino ($40.1 million) beat out a combined six other bidders to obtain mini-casinos. Three bidders participated in the Feb. 8 auction, with Mount Airy Casino coming away with the license for just shy of $21.9 million. Parx Casino ($8.1 million) landed a mini-casino during the Feb. 22 auction, followed again by Penn National, which spent $7.5 million as the only bidder April 4. That was a subsequent auction as the state attempted to sell off the remaining licenses.

Interestingly, Penn National has been the most vocal opponent of mini-casino expansion. As the only casino in the central area of Pennsylvania, Penn National was steadfast in its claim that the satellite properties would result in “significant and unique” damage to its Hollywood Casino, according to a 57-page lawsuit against the state that was filed in federal court in January.

Yet while the company is continuing to fight to get the satellite casino law overturned, Penn National figured it would still participate in the auctions as a backstop in case its lawsuit is dismissed. Devil you know, right?

What happens to the auctions now?

The likelihood is high that the auction process stops with five licenses still up for grabs. The PGCB may decide to hold a third and final round of bidding for approved non-casino license holders. Then again, there is strong outside interest to land a mini-casino site. Note that Category 4 licensees are not eligible to participate in online gambling, so that is not an option for mini-casino license holders.

Now it is time for the PGCB to assess the situation. The next round of auctions, if they took place, would be open to groups outside of existing casino license holders, in which case the PGCB would predetermine eligibility requirements.

Buying out Pennsylvania casinos is becoming a hot ticket. It affords outside companies the opportunity to get in on the ground floor as the world of gaming is due to expand.

Still, purchasing these Category 4 licenses will not provide owners to offer such experiences. The logic goes that casinos with higher-category licenses could provide sports betting, et al., but a mini-casino on its own would not have that kind of freedom. To boot, a Cat 4 casino would not have access to any of the available interactive gaming licenses.

Basically, if an outside group invested in a mini-casino, that would be all it was investing in.

The other option for the PGCB is to shut down the auctions altogether. Half of the 10 mini-casino licenses are still available, and the last auction went without a bidder. Expectations have already been met. Large bids from the first few rounds generated over $120 million. Consider that, had all 10 licenses sold for the base cost of $7.5 million, the result would be $75 million in revenue.

The ideal locations for mini-casinos, allowing for buffer zones from existing casinos, have already been taken. And over 1,000 municipalities in the state have opted out of hosting a mini-casino. Available options are slim for the PGCB. Perhaps it is time for it to take the money and run.